Capital Gain Tax & Interest Income

The Mumbai bench of the Income-tax Appellate Tribunal (ITAT) ruled that the difference between the proceeds from redeeming unlisted non-convertible debentures (NCDs) and their purchase cost will be considered as 'Interest income' and not 'capital gain tax'. It will be taxed under the head 'Income from other sources' for the investor.

About 

Capital Gain Tax 

• Any profit or gain that arises from the sale of a ‘capital asset’ is known as ‘income from capital gains’. Such capital gains are taxable in the year in which the transfer of the capital asset takes place. This is called capital gains tax.
• The following items do not fall under the category of capital assets:
  • Stocks, consumables, or raw materials held for business or professional purposes
  • Personal belongings like clothes and furniture used for personal use
  • Agricultural land in rural India
  • 6½% gold bonds (1977), 7% gold bonds (1980), or National Defence gold bonds (1980) issued by the central government
  • Special bearer bonds (1991)
  • Gold deposit bonds issued under the gold deposit scheme (1999) or deposit certificates issued under the Gold Monetisation Scheme, 2015, and Gold Monetisation Scheme, 2019 notified by the Central Government.

Interest Income 

• Interest income refers to the money earned by an entity for lending its funds or allowing another entity to use its money.
• It is typically considered taxable income and is reported in the income statement because it represents revenue earned by the entity.